Do you use savings to pay off some of the mortgage

meggiemoo1234 · 5 September 2017 at 4:10PM

Views and advice would be welcome.
Both my husband and I own our own small business. Over the years we have done quite well and managed to save a little. This year it has all changed as our work has decreased therefore our salaries are smaller. One of us may even go out to work part time with someone else.
Our mortgage is due for renewal in October. We still owe £44,000 which is planned to pay off over the next eight years.
My thoughts when looking for a new mortgage are - due to the decline in our salaries, not very good interest rates and mortgage rates possibly going up that we use our savings to pay off £20,000 on changing. Then our monthly rate would obviously go down and in the long run we would be saving. OR just change mortgages withouth paying off any.
Would be grateful for any advice Thank you

bengalknights · 5 September 2017 at 4:20PM

I would suggest pay the mortgage down as this way you will shorten terms pay less interest and have lower outgoings

wishingthemortgaheaway · 5 September 2017 at 7:30PM

But, do you need the security of those savings in a time when your jobs are in a fragile situation? Have you got other savings you could fall back on?
What about an offset Mortgage where the savings are massively reducing your interest, but still available if needed?

beanielou · 7 September 2017 at 3:57PM

wishingthemortgaheaway wrote: »

But, do you need the security of those savings in a time when your jobs are in a fragile situation? Have you got other savings you could fall back on?
What about an offset Mortgage where the savings are massively reducing your interest, but still available if needed?

Agree with this.

Anonymous101 · 7 September 2017 at 4:21PM

bengalknights wrote: »

I would suggest pay the mortgage down as this way you will shorten terms pay less interest and have lower outgoings

I'd suggest the opposite. Keep the money invested in equities as long as you can and don't over pay the mortgage until you want/have to.

Currently mortgage rates are so low there's a clear difference but even over the history of the stock market the annual return on equities is 9.5% vs the average mortgage rate of 6.5%. That 3% on £100,000 or more can make a HUGE difference over 10-20 years, especially when compound interest is considered.

wishingthemortgaheaway wrote: »

But, do you need the security of those savings in a time when your jobs are in a fragile situation? Have you got other savings you could fall back on?
What about an offset Mortgage where the savings are massively reducing your interest, but still available if needed?

I agree... if you invest the overpayment amount within a S&S ISA its available should it be required.

Savings for a buffer / fall back, in cash, should be put before any thought of over payment or investment IMO.

Do you use savings to pay off some of the mortgage

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